Deal Capsule - Transactions in Chemicals July 2016

Deal Capsule - Transactions in Chemicals July 2016

Consolidation in agrochemicals continued, with Bayer proposing the $62 billion acquisition of Monsanto – the largest-ever all cash deal.


KPMG’s Deal Thermometer indicates that the environment for M&A activity will remain moderately strong in chemicals.

Deal focus areas

Deal frenzy in the chemical sector continued with the top 10 announced deals exceeding $130 billion. Agrochemicals were the main focus area with two mega-mergers in the pipeline. Germany was among the most active countries with many of its major players pursuing strategic investments.

The wave of consolidation in the agrochemicals market continues. The deal frenzy started with the announced Dow DuPont Merger last year, followed by ChemChina bidding for Syngenta in Q1 2016.

Finally, Bayer AG announced a $62 billion acquisition of Monsanto Co. which would propel it to number 1 in the sector. The planned acquisition of Monsanto offers Bayer a complementary portfolio as Monsanto is the market leader in seeds.

The market consolidation followed a pronounced drop in sales last year. As revenues of the global agricultural industry fell by as much as 10% in 2015, farmers cut back on spending. Agrochemical sales declined in conjunction, putting all players under pressure. Selling a broad package of products is generally seen as a successful strategy for the future.

Smaller players in the market are acquisitive as well. CVR Partners L.P. completed the acquisition of Rentech Nitrogen Partners, L.P., a manufacturer of nitrogenous fertilizers, in Q2 2016. The deal is worth $0.8 billion and adds to CVR’s existing fertilizer portfolio.

Strong german activity

Besides Bayer‘s blockbuster deal, other German chemical firms are active this year as well with a focus on high margin specialty segments.

BASF SE strengthens its position in the coatings market by announcing the $3.2 billion acquisition of Chemetall GmbH. Chemetall’s surface treatment solutions strategically complement BASF’s coatings business.

Evonik Industries AG offered to buy the performance materials unit from Air Products & Chemicals Inc. for $3.8 billion – the largest deal in its history. With 23% profit margin the targeted unit strengthens Evonik’s presence in the US market. The deal allows Air Products to divest non-core assets as planned in order to focus on industrial gases.

Lanxess AG placed a $0.2 billion bid for the Clean and Disinfect business of Chemours Co., serving its position in mid-sized, less cyclical markets which offer high margins. Lanxess also completed the formation of a joint venture for synthetic rubber with Saudi Aramco investing $1.3 billion for a 50%-stake.


Market turmoil in China significantly reduced M&A activity at the beginning of the year. However, as markets calmed, deals picked up and China regained its position as the most active country behind the US. The majority of the top Chinese deals are downstream on the value chain.

This is the case with CMOC Ltd., a subsidiary of China Molybdenum Co., Ltd. announcing the $1.5 billion acquisition of Anglo American PLC’s niobium and phosphates business based in Brazil. Thereby, China Molybdenum optimizes the structure of its foreign assets and underpins its position as a market leader. For Anglo, deleveraging is a main priority after stocks plummeted by 75% in 2015 due to concerns with its high level of indebtedness.

Capital index

Chemical indices recovered from their losses at the beginning of the year with the S&P 500 Chemicals trading at +2.4% YTD. European (-3.2%) and Asian Bloomberg Chem (-3.1%) indices lost slightly in 2016.

Best performing companies among the largest chemical firms globally comprise DuPont’s spin-off Chemours Co. (+53.8%), Indorama Ventures PCL (+39.6%) and Lotte Chemical Corp. (+18.6%).

Asian stocks were hit hard by global market turmoil and sluggish demand. For example, Sinochem Corp. (-31.2%), Mitsubishi Chemical Holdings Corp. (-30.1%) and Sumitomo Chemical Co., Ltd. (-30.5%) recorded significant losses.

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